Letter in full: Tourism sector tests case for VAT cut

In an open letter to the Chancellor, tourism chiefs argue that a VAT cut on
tourism would be tax neutral for the Government and would result in an extra
£4bn a year through increased visitor numbers. Read their letter in full.

'The pride of the Diamond Jubilee and outstanding success of the Olympics has been countered by a double-dip recession and on-going high unemployment.'Photo: ALAMY

7:00AM GMT 09 Dec 2012

Dear Chancellor,

This has been a challenging year for the UK. The pride of the Diamond Jubilee and outstanding success of the Olympics has been countered by a double-dip recession and on-going high unemployment.

The UK is better placed than any country in the world to use its tourism industry to boost the economy. We were disappointed this was not reflected in the Autumn Statement.

By keeping the rate of VAT charged on tourism at 20 per cent, we risk missing a golden opportunity to capitalise on our nation’s global brand and generate jobs and growth.

As you look to 2013, we urge you to consider the opportunity at stake, and move to reduce the rate of VAT charged on visitor attractions and accommodation to five per cent – in line with our international competitors.

The Treasury has very kindly invited us to use its own models to evaluate the impact of a VAT cut on the UK economy. The case for a reduction is clear.

Treasury models predict that a cut would be revenue neutral and contribute £4 billion each year to the UK economy. Deloitte research also shows that the reduction in VAT would create 80,000 jobs.

The case is made even more robust in that it is the only export industry to be hit with a levy. This is despite tourism being the UK’s third largest export, earning £17.7 billion in foreign currency each year.

We are also the only major tourist destination in Europe not to exploit the EU’s rules and reduce the rate of VAT charged on tourism.

In 2005 David Cameron said the government wanted to see the UK move up the league table for international visitors to fifth place. Since then the UK has slipped to seventh place – behind Turkey.

We lag behind Germany in attracting Chinese tourists, and internationally we are ranked 135th out of 139 on the competitiveness of our sector.

It doesn’t have to be this way. This year has demonstrated the unique attraction the UK enjoys internationally. Let’s not squander this by levying VAT on our oversees visitors.